VeriFone Holdings Inc. (PAY) is expected to report fourth quarter and fiscal 2009 results later today.

Management had earlier stated that business has begun to recover in both domestic and international markets. The company expects revenues between $208 million and $215 million in the fourth quarter of fiscal 2009.

Earnings per share (EPS) are estimated between 23 cents and 25 cents.

The company doesn’t expect a meaningful decline in inventory in the quarter but is exploring alternative supply chain structures with contract manufacturers, which should result in further reductions in 2010.

For full year 2009, VeriFone projects revenues between $835 million and $842 million. EPS is projected between 83 cents and 85 cents. Management expects the worldwide economy will recover moderately and expects a 10% growth in 2010.

Although there are signs of the economy are recuperating, recovery is going to slacken and revenue growth will be challenging. The prospect for margin recovery may be attributed to increasing inventory write-downs in the recent quarters, which in turn may lead to higher gross margins in the coming quarters.

In the past few quarters, VeriFone experienced lower than expected revenue levels and softer demand globally due to weakened markets and adverse economic conditions. However, the company’s results for the fiscal third quarter were ahead of expectations.

Given the economic turmoil, the company resorted to cost-cutting measures to keep up the margins. VeriFone reduced its headcount by approximately 500 in the past twelve months. The company also announced a re-orientation of its engineering efforts towards cost redesign across all of its major platforms and completed 7 of the 14 cost reduction projects. The target for this initiative is a 300 basis point reduction in cost of goods sold by the fourth quarter of 2009.

Our long-term recommendation for VeriFone is Neutral, which means the stock will perform in line with the broader market.

Based in San Jose, California, VeriFone designs, markets and services a transaction automation system that facilitates electronic payments between consumers, merchants and financial institutions.

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